On Saturday evening, President Trump is expected to announce his choice to fill the Supreme Court seat now vacant as a result of the death of Justice Ruth Bader Ginsburg on September 18. News reports indicate that Trump has chosen Judge Amy Coney Barrett of the U.S. Court of Appeals for the Seventh Circuit for the vacant seat. Given her possible ascension to the highest court in the land, her judicial opinions, legal writings, and speeches are worthy of careful examination in order to evaluate her approach to important tax law matters
While lower court judges are constrained by precedent and other judges in a way that a Supreme Court justice would not be, how a judge approaches an issue and what arguments they consider can provide insight into their assessment of future cases. With that in mind, we have looked at several articles and tax decisions by Judge Barrett to try to see how deferential she may be to governments targeting taxpayers and how she would approach issues of state tax overreach and the judicial role in constraining it.
In a 2013 law review article on when the Supreme Court should overrule past decisions, then-Professor Barrett described seven cases as “superprecedents” that no one seeks to overturn and to which no judge would entertain a challenge. Among the cases she includes as “superprecedent” is Helvering v. Davis, the 1937 decision that upheld the Social Security Act as a valid exercise of the Constitution’s taxing power and the power of the federal government to spend for the “general Welfare of the United States.” The case resolved the famous dispute between founders Alexander Hamilton and James Madison over whether the Constitution barred spending targeted (or redistributed) to benefit discrete groups, finding that “The discretion belongs to Congress, unless the choice is clearly wrong, a display of arbitrary power, not an exercise of judgment.”
Judge Barrett’s inclusion of Helvering is an interesting one, as the Hamilton-Madison debate on the matter was hotly contested for over a century. Helvering upheld Social Security but also is the legal basis for unpopular congressional acts like earmarks, industry-specific tax breaks, and company-specific bailouts and subsidies. While federal judges generally avoid the inherently political practice of evaluating the benefits of such matters, judges in Arizona have a Gift Clause in their state constitution that prohibits payments or loans to private individuals or companies, which has been successful at reining in some of the worst abuses.
In addition to articles she has written, the decisions that Judge Barrett has authored or joined can provide important insight into her judicial philosophy on tax matters. In Groves v. United States, 941 F.3d 315 (7th Cir. 2019), an accountant was accused by the Internal Revenue Service (IRS) of promoting abusive tax shelters. The IRS imposed a penalty ten years after the activity, which accountant said was beyond the statute of limitations. The court ruled for the IRS, and the accountant sought an immediate appeal on that question. Unfortunately, his lawyer’s paralegal emailed the request to a wrong address on the last day of the deadline, and the request was not filed in a timely fashion. In a unanimous opinion, Judge Barrett ruled against the accountant and stood by the deadline. Barrett cited the 2007 Supreme Court opinion in Bowles v. Russell, a 5-4 decision that narrowed the scope of judges granting equitable relief from statutory deadlines.
In A.F. Moore & Associates v. Pappas, 948 F.3d 889 (7th Cir. 2020), Judge Barrett wrote the unanimous opinion for a three-judge panel allowing Illinois taxpayers to bring a property tax dispute in federal court. Normally, under the federal Tax Injunction Act, taxpayers must pursue tax claims in state court and cannot pursue them in federal court unless the state fails to provide a “plain, speedy, and efficient remedy.” The taxpayers – who paid local property taxes at the statutory rate but had evidence that most other taxpayers were allowed to pay far less – had attempted for a decade to bring their claim in Illinois court but were only allowed to contest the correctness of their calculation and were “not free” to raise any constitutional objections to the tax. The federal trial judge ruled for the government, concluding the claim was barred by the Tax Injunction Act.
In reversing and ruling for the taxpayers, Judge Barrett observed that because the state had conceded that the taxpayers had no way of pursuing an equal protection claim in state court, it made “a potentially complex issue a great deal simpler.” While another judge might have been hesitant to disturb the notorious Illinois property tax system, Judge Barrett rightly concluded that this was “the rare case in which the taxpayers lack an adequate state-court remedy.”
Note: on September 8, 2020, the government appealed to the U.S. Supreme Court. See Kaegi v. A.F. Moore & Associates, No. 20-357 (U.S. cert. pet. filed Sep. 8, 2020).
The case of VHC, Inc. v. Commissioner of Internal Revenue, 968 F.3d 839 (7th Cir. 2020) is instructive as well. This case involved a family company’s payments to a member of the family, which the IRS characterized as taxable income and the company characterized as unpaid bad debts for which it was entitled to a deduction. Writing for a three-judge panel, Judge Barrett did not disturb the Tax Court’s conclusion that there was little evidence these were bona fide debts, stating that “a petitioner who asserts entitlement to a deduction faces a steep climb” and “we place the burden on the taxpayer to prove that the assessment was erroneous” by demonstrating that the “assessment is arbitrary and excessive.”
It’s nothing new for taxpayers to be told they are guilty until proven innocent, and that the IRS determinations are given greater weight than their own. Bad facts make for bad cases, but Judge Barrett left little room for the taxpayer to press its case.
Judge Barrett, as far as we can tell, has not opined on the dormant commerce clause, the validity of retroactive taxes, or the abuses of the IRS. But in A.F. Moore, Judge Barrett found for the taxpayer in a case many other judges might have given to the government. In VHC, Judge Barrett gave little credence to the taxpayer’s argument, applying the guilty-until-proven-innocent standard that is common in the tax law. And in Groves, Judge Barrett rejected any equitable relief for a failure to meet a deadline.
All these rulings are amply supported by precedent and if they demonstrate anything, it is consistent and unyielding application of exactly what is written. Past performance may be no guarantee of future results, as Supreme Court justices can overrule Supreme Court decisions in a way that appellate judges cannot. But that she let taxpayers take on the Illinois property tax is a good sign. And the last thing the IRS may want on the Supreme Court is a stickler who will hold them accountable for their unwritten rules and unclear directives to taxpayers.
 Amy Coney Barrett, Precedent and Jurisprudential Disagreement, 91 Tex L. Rev. 1711 (2013).